Management and Organizational Studies 2310A/B Lecture Notes - Lecture 5: Common Stock, United States Treasury Security

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Nicholas Kahnert

Document Summary

Annuities and perpetuities: annuity: nite series of equal payments that occur at regular intervals, ex. Growing perpetuity: the annuities and perpetuities discussed so far have constant payments, growing perpetuities have cash ows that grow at a constant rate and continue forever, growing perpetuity formula, pv0 = c1/(r-g) Growing annuity: growing annuities have a nite number of growing cash ows, formula, pv = c1/(r-g) [ 1 - ((1+g)/(1+r))t, k. Things to remember: you always need to make sure that the rate and the time period match, monthly payments require a monthly rate, weekly payments require a weekly rate, annual payments require an annual rate. Rearrange the ear equation and you get: apr = m [ (1+ear)1/m -1] Di erent types of loans: pure discount loans, interest only loans, amortized loans with xed principal payment, amortized loans with equal payments. Pure discount loans - example: there are no annual payments, treasury bills are excellent examples of pure discount loans.